Making It Work When The Neighborhood Is Tough

NEW YORK
— Alton Dunk smiles as he talks about his first days in the business.

He says he plowed $6,000 of savings into the renovation of a tiny, storefront, take-out restaurant, but ran out of money before he could buy a stove.

Undaunted, Mr. Dunk went ahead and opened the doors of Soul Food Kitchen, and then spent four months rushing hot platters of barbecued pork and collard greens down the stairs and around the corner from the stove in his mother's apartment into his restaurant.

A small loan would have made his life much more comfortable, and the early months of his business much more viable, "but where was I going to get a loan?" he asks.

Starting, then running, a small business is no easy task under the best of circumstances, not when you have venture capitalists clamoring to invest millions, not when you have banks willing to bankroll your location on Madison Avenue or its equivalent.

But when the entrepreneur belongs to a minority, and when the business address is in a neighborhood considered "tough," the battle to start going, then keep going takes grit.

Dunk's restaurant lies in the heart of New York City's Bedford-Stuyvesant, a tough Brooklyn neighborhood where an estimated 35 percent of the residents live below the poverty line - not an appealing prospect for a bank loan.

But what about a community development corporation (CDC)? More than 2,000 of these nonprofit groups link public and private resources, helping entrepreneurs like Dunk connect with lending institutions.

"I tried calling them," he remembers. "As soon as I heard about all the paperwork they wanted, I just hung up. All I felt was frustrated."

Dunk's story is all too common, say some who work with inner-city entrepreneurs.

Despite decades of a myriad of public and private urban economic initiatives, despite the best efforts of university think tanks, urban economists, and well-intentioned philanthropic groups, the very entrepreneurs the inner city most needs often feel they have nowhere to turn when launching a business.

That's especially true when it comes to the question of raising capital - money.

"Disconnect" describes the gap between the needs of many small-scale urban entrepreneurs and the programs intended to help them, says Anne Habiby, director of research for Boston's nonprofit Initiative for a Competitive Inner City.

Overlooking the little guy

It may occur because many businesses are too small to attract the attention of organizations interested in more sweeping change.

Or it could be that a baffling mountain of paperwork stands between an entrepreneur and the help he or she may otherwise qualify for.

But often, Ms. Habiby insists, it's because, until recently, public and private groups dedicated to helping the inner city were not "geared towards understanding business," and failed to focus realistically on the needs of promising smaller entrepreneurs.

Detroit restaurateur Sherman Sharpe feels Dunk's pain. In 1986 he left his law practice to pursue his dream of creating an upscale restaurant in downtown Detroit. The shift came, in part, because as a Detroit native he wanted to give the city "something to be proud of."

But when he turned to a local CDC for help in financing his scheme, he found that the paperwork required "was worse than dealing with a bank." Even he - a practicing attorney - felt defeated by it.

As for the city of Detroit, embarked now on an aggressive urban-revitalization program, Mr. Sharpe says, "The city tries to be helpful." But, he insists, small players like him excite little interest. "They mostly go for the large entrepreneurs."

Sharpe ultimately went forward with his plans, tapping his own savings. Today his Harlequin Caf is doing a healthy business, and he's even contemplating a second location. But he still wonders how others can follow in his footsteps.

"Heaven help the little guy" who tries to create a small urban business without private resources of his own, says Sharpe.

New era of help

But some say a new era of more practical, focused help for smaller inner-city businesses could be dawning. When it comes to CDCs, says Evelyn Friedman-Vargas, executive director of Nuestra Communidad Development Corp. in Boston's Roxbury section, everybody's on a learning curve.

"You have to remember most CDCs started out focusing on real estate development," she explains. "We've only gotten into business development in the last five years, and we've only gotten good at it in the last three."

Friedman-Vargas says that among other obstacles, small staffs make it hard for CDCs to offer the labor-intensive help most needed - like assistance with paperwork. But "we're trying."

Recently, Nuestra Communidad started focusing on smaller loans most useful to mom-and-pop operations.

Such loans range from $5,000 to $150,000, and the group has been successful in securing $1.8 million of financing over three years, with only one default (see story, left).

Some private organizations are also narrowing in on one-to-one programs for businesses.

Donald Delandro, owner of Affordable Supply Co., a janitorial services company located in a gritty section of Washington, D.C.'s Northeast quadrant, says he's been grateful for a recent boost from the Greater Washington Board of Trade (see story, above).

Hard choices

But when Mr. Delandro launched his company 10 years ago, he had to borrow the money from his credit cards - not an ideal way to begin a business, he points out.

If there was any program or organization that could have helped, he says, "I was unaware of it."

Delandro deliberately chose to locate in the inner city, both to help turn the neighborhood around and to create jobs for neighborhood kids. But his task has not been an easy one.

In addition to facing the particular challenges of the inner city - higher security and insurance costs, poor infrastructure, a neighborhood that may look scary and uninviting to customers - he says he also suffers because his business is small.

"If you're a little guy, you get no discount from suppliers," he explains. "That makes it hard to compete."

Delandro says, however, that he's committed to the idea of revitalizing the inner city and intends to stick it out. "I'm frustrated," he says, "but not yet cynical."